Outlook for soybean values may not be all that rosy

Rising supplies may run up against a major drop in demand

A deal between the U.S./China could be a boon for soybeans, but it has yet to happen. Photo:
Getty Images

Farmers in the United States are widely expected to plant soybeans this year instead of corn or wheat because of wet conditions, which could turn out to be a risky move.

A deal that is expected to come out of U.S./China trade talks has been said to be a boon for soybeans, but there are a number of factors to consider.

The much-vaunted deal, which has been scant on details so far, isn’t signed yet. As months passed, a target date for the deal was pushed back repeatedly. Proclamations of progress made in negotiations once propelled markets upward, but positive news has more recently been taken with a grain of salt.

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One commodity market analyst was forthright in his prediction there isn’t going to be a deal. The impact of a failed deal would likely drive down soybean prices by at least 50 cents per bushel or more. If there is a deal, he said bean prices would rise by 50 cents per bushel or more.

For canola, the spillover would mean swings either way of $10-$15 per tonne depending on the outcome.

Then there is the growing problem of African swine fever in China, with more than 120 cases diagnosed in hogs since August. As the disease is nearly always fatal for hogs, about a third of China’s hog population has been culled to help stop its spread.

That in turn has dramatically reduced China’s demand for soy products for hog feed. One report pegged the country importing 22 million fewer tonnes of soybeans this year.

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On top of that is an ample supply of soybeans on the global market. The latest world agriculture supply-and-demand estimates (WASDE) report from the U.S. Department of Agriculture stated about 360.6 million tonnes of soybeans are to be produced in 2018-19, some 11.3 million tonnes more than the 2016-17 harvest.

USDA pegged global ending stocks at about 107.4 million tonnes for the current crop year, 11.7 million more than two crop years ago.

As U.S. farmers look to soybeans as something of a saving grace this year, with a projected 123.7 million tonnes in 2018-19, South America has added a very sizable crop, according to USDA.

Although Brazil didn’t reach its projected 122 million tonnes of beans this year, its 117 million tonnes have been among its largest crops. Added to that was Argentina’s 55 million tonnes of soybeans this year.

To take some liberties: Beans, beans, the more you grow, the more you could see prices not as good.